The article analyzed here criticizes the use of GDP as a measure of economic growth and stability. The article focuses on the expenditure approach of accounting for GDP where GDP is the calculated through the price of goods and services. The demerits of using GDP as a measure of economic performance have been explained with a slight interpretation of green GDP in the end which implies the importance of environmental factors on economic performance and activity.
The research study referenced in the article shows that GDP is not an accurate measure of economic performance of a country. Accounting of GDP is mostly performed in two ways which are the output approach and expenditure approach. The method outlined in the article for GDP accounting is the expenditure approach. It is argued in the article that the GDP depicted stable growth and good economic performance which was misleading and expectations for future economic performance were quite optimistic. The reliance of GDP on gross spending irrelative of income and actual cash flows created a major gap between expectations and reality. The realization of profits from transactions on which receipts had not been made also caused the GDP to be overvalued as losses in the subsequent period not only declined from previous year levels but to five year lows.
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